AmInvestment maintains 'buy' on KPower

KUALA LUMPUR: AmInvestment Bank Research reiterated its "buy" recommendation on Kumpulan Powernet Bhd (KPower) on anticipation of its growth potential in FY21 and FY22.

It has a fair value of RM5.97 on the stock based on 15x FY22 earnings per share, which is at a discount to the average forward 20x price-earnings of leading renewable energy players globally.

It said the discount was owing to KPower being a relatively new player in the space with relatively small market value.

"On the flip side, from a relatively low base, the growth potential of KPower’s earnings is tremendous at >100% and >40% in FY21 and FY22F respectively based on our projections," it added.

The research house said it was upbeat over the group following an analyst briefing on expectation that the winners of the one gigawatt fourth cycle of the large-scale solar project being likely to be announced this year.

KPower has participated in the tender for 50MW, which could involve asset ownership, in addition to engineering, procurement, construction and commissioning (EPCC) packages.

"We believe KPower is giving Samaiden, Solarvest, Cypark Resources and Megafirst Corporation a run for their money, a handful of listed companies that have proven capability and track record in carrying out EPCC solar projects.

"We gather there is a possibility that new entrants could also emerge winners for the LSS4 work packages. If this happens, KPower may reach out to them to set up JVs to carry out the work packages," said AmInvestment.

KPower could be targeting another 50–100MW under this JV model, it added.

The group maintained its target job wins at RM2bil in FY21 versus AmInvestments more conservative assumption of RM1.4bil annually in FY21-23.

KPower has secured RM247.3mil in new job so far in FY21. Its construction order book stands at RM1.3bil.

Identifying EPCC as one of its growth areas, KPower clarified that it is in talks with Taiwanese-based Global Microgri Technologies with regards to a NT$3bil (RM432mil) solar project in Taiwan as opposed to news reports suggesting that it had won the project.

"At about 12x FY21 earnings, we believe this homegrown renewable energy player has a compelling investment case given its involvement in the green sector where the growth trajectory is just beginning," said the research house.
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